Retiring at 40 ,with 2 kids... is this possible without sacrificing too much?

[anxiousplanner]

Husband (31m) and I (28F) will be trying for our first baby soon. Plan is to have 2 kids, fairly close in age.

Recently I've become a little 'obsessed' with the idea of financial independence/retiring early. A huge part of me feels like there is more to life than working, having children and retiring at 67 (or even 55, which still feels depressing). Hanging on to this idea currently gives me hope, but I'm aware that I'm just looking for a way to escape.

Husband and I are in a good financial position with relatively well paid jobs for our age, and I feel like as we are still fairly young we have options, but struggling to know what the right thing to do (for us and future family) is.

Financial details:
Household gross income c£100k (Husband earns £55-60k, I earn £50k)
Salary net of tax/NI & pension & rail fair is £5400/month

£160k mortgage on a 3 bedroom semi in SE of England
Mortgage is 30 year term, £600/month payment
Other monthly bills (incl gym £120, council tax £150, tv £70, phone/internet £60 , mobiles £60, insurance/adhoc £40, gas&elect £90, credit card £400

So total monthly commitments is £1,590

Petrol & groceries about £400-600

So total outgoings including food is currently c£2200

Leaving £3,200 as disposable income/savings

Husband and I are agreed that we are not going to chase having a bigger house/car/keeping up with the Jones' if it means that we get to have some freedom when we're relatively young and have the energy to travel when we retire.

If I assume that having a child/children will cost about an additional £500- £700 per month, then that leaves £2500 to save every month.

If we decide not to send them to private school in the next 10 years, then a saving of £2500 per month would give me about £650k of cash by the time I'm 40 (7% stock market rate).

If we were to retire at 40, and withdraw 4% of this year on year then we would have about £26k of interest income = c£2200/month which is our current expenses and standard of living.

Basically.... what do you think of this life plan? Am I missing anything here? Will our kids be missing out a lot if they don't go to private school (as we could afford to send them there but then would not have savings). Planning on bringing them up with learning the value of money, so don't want to give them everything.

Right now I just feel like I'm at a crossroads, and whatever path I take now will determine my future, and it's a little scary but also exciting if I can pull off early retirement. I just want to know how I can balance everything to get the best of both worlds (realising that I am in this very fortunate position I don't want to waste it).

Any thoughts on what you would do if you were in my position would be great, and any advice or insights on things I may have missed would be appreciated.

tinkly I find that a very inspiring post to read, thank you.
We live small in some respect, but rather extravagantly in others- some of those we could cut back on, some give us enormous pleasure.

What I take from the FIRE movement is an awareness of how little spending is needed for a happy life, and the freedom having money gives you. A reminder that we get to make choices, more choices than we maybe realise. (This isn't new- this is middle class people becoming "gentlemen/ladies" who do not need to work).
I find it troubling in that it is fundamentally based on inequality. Some people (and FIRErs point out- many people) in our society are paid so much, that they can earn enough to live on for their whole lives in just a few years. Others toil away for decades just scraping by. I don't think FIRE makes this worse, but it does show it up rather clearly, and some of the rhetoric is fairly oblivious re just how much choice people do and don't get re their saving power.

In one way this is a very inspiring thread - the idea of looking across the range of your life and setting long term plans. In the last few years I have also become quite interested in the digital economy, in 'side gigs' and the idea of a passive income - money doesn't always need to arrive in the conventional PAYE form.

But I am in my early 40s and life looks quite different now than it did when my DH and I were 28. We are substantially better off financially, but life has taken us in a completely different direction since becoming parents. We are living in a place we had never heard of then, I am working in a new sector and the 'workplace' as such has changed beyond recognition. Many of the certainties we had then have long gone.

At 28 I also didn't really believe in sex-based discrimination or ageism in the workplace. I won't elaborate here, but in my forties, I definitely do!

Good luck with your plans, anyway.

@womaningreen

a combined income of 6 figures is not unusual and could be achieved by a lot of professionals (even teachers, above the basic scale) as well as others in a whole variety of jobs. Some of the richest people we know of locally are tradesmen such as plumbers!

We both put in our years at uni, worked hard and weren't extravagant.
Unlike younger people, we benefited from cheaper property prices and never mortgaged ourselves to the hilt even when on paper would have borrowed more. We spend carefully, credit cards always paid off in full always etc etc.

Yes of course there are people who can't ever have this type of combined income and hate their work. That's a different issue.

I think my point is that it's more of a priority to find work you like (and put in the time and sacrifices to re-train or get qualifications if need be if they are within your reach, intellectually) .

Not everyone can have a professional job , fact of life.

I just think that the OP's subject line was misleading; reading on, it's about not being tied to her job which she doesn't seem to enjoy. why not find another job? Accountants are in demand and many are s/e so they set their own hours - perfect to combine with a family.

I'm not sure that 'retirement' means to the OP. Are her own parents blissfully happy or resigned to more years of caring for her (possible) children? And as I said before, would she do the same for hers in time?

Interesting ideal. 40 is very young to be retiring, especially when they are the best earning years and the expenses on your hypothetical children are only just starting to rev up.

If you retire at 40, I'd say you are doing it for yourself, rather than for your dcs. I would also say that you may not therefore be ready for children, because you are not prepared to change your life sufficiently to include children in it.

Once you have children, your life is no longer your own. You have mortgaged your life away indefinitely. Unless you are prepared for the sacrifices and twists and turns that life throws you when you have dependents who don't follow the rule book, then you will find parenthood very hard.

When I was your age and pre-children, I thought I could control things. I am also a meticulous planner.

It took having dc to realise very little is in my control. I have to roll with the punches and revise and adjust my plans constantly. Things change from year to year. It is laughable to think that you could possibly plan so far ahead.

By all means have it as your goal. But don't get too stressed if you don't get there in a straight line.

Queen, I don't know what the stats are - I was just saying that there's a very clear divide in how FIRE works if you are in the 6 figure bracket. And someone said about reducing bills not making that much difference - it does if you are not in that bracket.

I just didn't want anyone reading this to think FIRE is impossible without six figures. I'm excited about FIRE!

Queen "I just think that the OP's subject line was misleading; reading on, it's about not being tied to her job which she doesn't seem to enjoy. why not find another job"

I guess because she doesn't want just another job.

Slightly misleading in that she might do something, but I get the impression OP meant do something if something arises that she fancies doing and would actually enjoy.

I would agree with all of Queen's posts. £650,000 is a laughably small amount to live on and stretch out over 40-50 years (with 2 children to support to boot).

That is hardly fuck-off money. More like oh-shit.

I agree with the posts by blueshoes.

It's fine to have a goal, but in all honesty, the first post reads like a wish list of someone who has so far had a charmed life where everything has gone swimmingly, all plain sailing. (apologies if this is wrong OP!) with no twists or potholes in the road. Like a tick list of their life for the future.

It rarely works like that as anyone in their 40s, 50s or 60s will tell you.

Some people are really fortunate, but amongst my small circle of close friends, their lives have been touched by infertility, premature death or severe illness, parents who need to be cared for (full role reversal), redundancy, and more. None would have foreseen that at 28.

Lighten up anxiousplanner. If you are a good accountant set up your own company maybe and then you can work as much or as little as you want. Find work you LOVE instead of regarding it as a chore and a means to and end(which may never come for all the reasons above.)

Your maths is waaaayyy off love, you can't live forever on the interest of £650k.
AND kids - your food bill will double, your travel bill will double - and you're planning on working fulltime? So need childcare. Our child care bill for 2 kids 3 days a week in the S.E. was £21k a year. a standard nursery will cost £50-60 per kid per day. Then they start school, you still need some child care, then they start with activities, or music, or school trips. And holidays, you'll need those with kids.
I think you need to be realistic - 55 years old would be a more achievable goal and you'll still need to make a lot of sacrifices.

Tinkly: “They really aren't bothered that they never went to Disneyworld or an African safari. That they never had designer clothes or the absolute latest phone.”

I was one who suggested that “making memories” costs money. It does, these days. Our life doesn’t involve exotic holidays like trips to Disney or African safaris. Our household income is way below what you need for that. Neither can we afford designer clothes for the kids or the latest phones.”

But A Holiday (of any sort) costs. New clothes (even H and M) cost. A mobile phone costs (even The cheapest monthly giffgaff)

We don’t live extravagantly. No designer handbags, regular nights out, our furniture is IKEA, not John Lewis, we don’t buy plants for the garden, or refurbish our house regularly . We do enjoy an annual holiday to France (drive, tunnel, self-catering gite) as I do think travel broadens the mind and a bit of warmth on my skin for a fortnight perks me up for the next 6 months, so camping in the UK in the rain every year wouldn’t do it for us.

“Making memories” costs money full stop and it’s all relative. If your memories are relatively simple it would cost a simpler ie smaller amount of money.

But it does still cost. No-one wants to be a hermit and not be able to even afford the petrol to visit another city for the day. To afford the train fair to see a relative in London when you live up north. To never go out for a meal to celebrate a birthday or for a big family weeekend away somewhere to celebrate a grandparenr’s 80th. To have to refuse music lessons and school trips. To say no to a request for an ice cream when you go to the park.

We both work FT. Our household income is 65k if DH does overtime. We count ourselves very lucky to have now no mortgage to pay and money in the bank from an inheritance but god, our household expenses seem to be huge these days compared to a good few years back.

I don’t know what I’m trying to say, really. Other than the basics seem to cost a lot these days. For some people (maybe public sector, whose wages have not gone up in years) it’s not necessarily about giving up extravagant things, but just wanting to have some basic life experiences that makes working, and life, worthwhile and enjoyable.

Queen: am laughing at the idea of teachers earning a combined income enough to produce a 6 figure income. Even with many years experience and extra responsibility you won’t get to 50k. You have to be senior leadership to earn anything like that, and that is just a small percentage of the school staff.

CurlyhairedAssassin. Yep your lifestyle sounds pretty similar to ours. But loads of people earn six figures and spend it all. I have friends that do it. People upgrade their lifestyles. There are posts on Mumsnet all the time from people with big salaries who are struggling to cope financially.

We had maybe 10 years of really good six figure money and we saved our excess and that's why we are retired. Yes I know that's not possible for the very vast majority of people, but if you have a high salary, it's something to think about.

SOrry to rain on parades, but my mum was an IFA and her advice even 5/10 years ago was that you needed a minimum of £1mill to retire on at 60/65 for an annual income of £30k, if you are depending on a SIPP (self invested personal pension). You would need more now to realise the same. To retire at 40 with a sensible annual income (ie liveable - £30k per year again), you would need upwards of £4mill, unless you were planning on using the 650k to Fund a few years off to travel and retrain into a new industry.

Seriously, aim on mortgage free. It gives you total security (no one can take your house off you) and you will free up so much income that you can go part time or work in an industry that you love even if it doesn’t pay well.

@Nagsnovalballs that does seem somewhat conservative. 1mil/30 comes to £33,333.33- so that would take you from 65 to 95 with over 30k per year even if you got no interest at all and no state pension!

NAGA- I don't understand your numbers? If you had a million invested and it was earning you 4% which is an under estimate, that would give you £40K income? Does not matter at what age you retire as long as you hit the 4% as it would never touch the capital.

You’re probably right, Tinkly. It’s probably why there are some people who burn through an inheritance or a small lottery win with nothing to really show at the end of it. It’s because once they have some spare money they try the finer things in life, get a taste for it, then don’t want to stop! It does make sense to keep your lifestyle spending much lower than your income if possible. It’s why I’m not touching our inheritance other than to buy a new car to replace our 13 year old one which was probably getting dangerous to drive!

That is the oft quoted figure. £1m pension pot to have a £30k income.

it is for buying an annuity - but look at SIPP calculators ..you can drawdown the capital interest and not touch capital or do a mixture of both. Of course a little more risk than an annuity but with annuity you are fixed for life and so any gains go to the provider

@messysurfaces et all.

You aren't thinking of inflation. £30K at 40 is not going to be worth £30K in today's money in 20, 30, or even 50 years time, is it?

My salary 40 years ago was about 1/6th of what it would be in today's money.

Annuities are rarely a wise buy- the provider needs to be turning a nice profit on them to offer them, apart from anything else.

curly nothing wrong with enjoying the finer things in life if you can. But it's worth being choosy re which you really enjoy and which just creep up on you.

Annuities are a bad buy just now because gilt yields are so low. You’d be crazy to take one out at the moment.

You say that's you income but what about when you have the children and are on maternity leave? Then do you plan to go back full time because child care will then cost a fortune? My son goes to nursery 2 days a week and that costs 450 a month!

You can put £500k in property though and if you make 4% after factoring in insurance and repairs, that's 20k a year. If you can deal with a certain amount of grief, say with student lets, then you can make a lot more than 4%.

Obviously any gain on capital your property makes is a bonus.

I don't understand your post tinklylittlelaugh
How would anyone make 4%? Are you talking of rental income or rise in house prices when you sell up?

There is no guarantee that house prices will continue to rise, in fact almost every economist would tell you it's highly risky to invest in property long term; many are predicting a crash of up to 50% in years to come as young people can't buy.

Biggest thing you can do is overpay your mortgage like MAD.

Put some figures into an overpayment calculator online and you’ll be AMAZED at what you will save.